First-time buyers spending nearly a third of their income on the mortgage

First-time buyers in the Netherlands spent nearly a third of their income on their mortgage at the end of last year - a new record, according to research by ING. Mortgage interest rates increased faster than wages and more than home prices fell, the bank said.

A first-time buyer buying an average owner-occupied home spent 32.9 percent of their income on the mortgage at the end of 2022, compared to 27 percent in 2021. According to ING, a 10-year mortgage with an average interest rate on an average home cost first-time buyers about 1,250 euros net per month on interest and repayment in the fourth quarter of 2021. A year later, that increased to almost 1,550 euros per month.

The increase is due to higher mortgage interest rates and home prices that still increased in the first half of 2022. In the fourth quarter of this year, ING expects first-time buyers to spend about 28.9 percent of their income on their mortgages. The bank assumes home prices will decrease by around 6 percent during this year and that wages will increase by 5.8 percent on average. “Affordability will therefore improve compared to the end of 2022, but first-time buyers will, on average, still be worse off than in the fourth quarter of 2021,” ING said.

People moving from one owner-occupied home to the next have a bit more luck affording their mortgage. The take-along arrangement usually means they can use the interest from their old mortgage on their new one. “This is favorable for those moving on with a mortgage contract less than ten years old because mortgage interest rates during this period were on average below the current level,” ING said. The same applies to those who refinanced their mortgage at lower interest rates in recent years.